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Guidebook on

Succession Planning

www.kredentmoney.com
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Contents
1
Introduction to Succession page
Planning 3

2 Ways of doing Succession

Planning
page
17

3 Practical
Matters – Investors
page
56
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Introduction to
Succession
Planning
In this chapter we will discuss about
the basics of succession planning,
need for succession planning, and
the various ways of doing Succession
Planning.
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1.1 What is Succession Planning?

“In this world nothing can be said to be certain, except death and taxes.” -
Writer
Succession planning in simple terms refers to the passing of assets and
investments down from one generation to another.

You can decide how much of your estate whether be it property, cars, shares,
bonds, Gold , mutual fund units and other financial investments, etc.

Its core objective is also to distribute wealth in a pre-determined manner to

a certain beneficiary or beneficiaries to whomever the owner wishes.

It is a dynamic exercise that needs to be reviewed at regular intervals to

include any changes that might happen in our life or in the applicable laws
of the country.

1.2 What is the need for Succession Planning?

a) Dying intestate (i.e. without a legal Will in place), can lead to various
complications like bickering and serious disputes among family member
potentially destroying peace and happiness.

b) You might have read about family battles in the mediafighting it out
in the courts over the estate of the deceased.

In most cases, they turn out to be a painful and traumaticexperience of

settling a will for the various litigants involved.

In fact, the situation of families suffering financially due to not getting

access to the deceased’s assets is repeated over and over again in
thousands of homes every year and the courts takes years to resolve the
issue.
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c) If you look around yourself, you are sure to find many real life examples
which would make you feel that this situation is like “KahaniGharGharKi
” prevailing in several homes but still people in India do not plan for
succession.

d) The social and family structure in India is increasingly turning nuclear

and the number of the affluent rises thanks to the India growth story and
aspirations of the next generation vary from the previous one.

e) Today, professionals earn more but at the same time the incidence
of divorces has increased, which creates an apprehension of the family
wealth going to outsiders.

There is a need to cater to their overall wealth planning for their

dependents.

Example: Need for Succession

Planning:

The battle over the late Priyamvada • Dying intestate lead to

Birla’s will, in the year 2004, brought complications for heirs
to the surface the crucial role played • Families suffer due to
by a will and the importance of non-access to deceased’s
succession planning. assets
• Changing Social and
There are several other celebrity cases family structure
that have been doing the rounds of • Common man in
the media, where siblings fight each nuclear families need to
other over the succession of the ensure pass wealth to
deceased. correct person
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1.3What is the need to involve your family in

financial matters?
It is important to involve your family in financial matters like succession
planning and discuss with them in-depth because it is a very crucial
aspect in their life.

The following points will help you recognise the importance of discussing
your financial affairs with family: -

Involving your spouse

a) In our country, most financial decisions
are taken by the head of the family. In
this process, the views of the spouse
(usually the wife) are generally
not taken into account.

b) Although, it may
sound irrelevant
to you, it is
important to
include your better
half while creating or
reviewing your financial plans.

Her opinions about various subjects

can bring a great deal of clarity and
another perception to you while thinking
about the long-term financial needs of your family
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Creating awareness among children
a) You would agree that children learn a great deal by observing.

Many of you would see that today’s generation are very smart and are
fast learners. They have the acumen and inquisitiveness to learn.

Therefore discussing with them will create curiosity in their mind and
help them understand financial matters better.

b) Schools and Colleges today are educating teaching children on

personal finance.
However as a parent it is vital that you too involve children while taking
financial decisions for the family, especially the ones that will affect them,
and inculcate in them the value of money

Financial independence
a) Involving your family in financial matters can help them become
financially independent and confident in the long run.

It will help them to appreciate the importance of budgeting, financial

planning and succession planning

b) Remember that while you involve your family, pass on all vital
information to your family members.

Also, be open and honest regarding the financial history of the family.
Let your experiences, whether favourable or unfavourable be a teaching
lesson for them.

This will avoid the confusion and tension that may occur in the future
You must understand that discussing money matters with family is not a
taboo. Thus start sharing all financial issues with your family before it’s
too late.
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If you are not confident, take help of an expert who can guide you and
your family.

1.4 De-bunking the myths about Succession

Planning
People are under many illusions when it comes to succession planning.
Here are a few common myths or wrong notions they posses in their
mind -

Myth#1: Succession planning is meant only for the wealthy

Fact: It is essential for everyone, and ensures that your hard earned
assets are passed on to those you wish to.

So, irrespective of the quantum of wealth owned and the society or

economic class you come from, succession planning is important.

As it potentially avoids the bitter disputes amongst loved ones later

and leads to peace of mind and happiness.

Myth#2: Succession Planning should be thought of only after

retirement
Fact: Life is unpredictable and uncertain and hence, the earlier one
thinks through and plans, the better it is.

Ideally, you should begin succession planning when your children are
young and your assets are also growing like when you are between 35
to 45 years of age or when you are between 45 to 55 Years.

If you die an untimely death due to an accident or some disease without

making a succession plan, then your family can suffer a lot.
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Myth#3: My legal heirs will handle it maturely

Fact: You could be day dreaming if you think that your heirs
know how to access your assets in absence of any succession
plan or proof left behind by you.

In most cases, situation becomes acrimonious between

different family members who fight with each other in the
courts to get their share of your estate.

This type of situation can be avoided if your heir happens

to be a lawyer or law expert but this is not the situation in
everybody’s family.

Myth# 4: I have registered my nominee(s); they will anyways be the

beneficiaries of my assets
Fact: This is not true in most of the cases. Most people in India feel
that adding a joint account hold¬er or doing a nomination is enough
for succession planning.

But the fact is that nominee is just a trustee of the assets only for time
being , to whom the Bank or any financial institution will transfer the
monies in case of the death of the holder of the assets.

But this does not mean that the nominee will always be the owner of
the assets.

The owner of the assets will be the legal heir as per a Will, or if one has
died intestate (i.e. in the absence of a Will), the transmission would be
as per the country’s succession laws.
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Myth#5: I don’t need to seek legal opinion

Fact: You should hire the services of a wealth adviser, a chartered

accountant and a trusted lawyerto see the process through.

This is to ensure that succession planning is done legitimately

considering the nitty-gritty involved.

It is highly unlikely that you are equipped enough to draft a proper

succession plan by yourself.Nowadays, there are many websites
which make will and other types of succession plan at a cost.

But this option is for very savvy people only.Succession planning, if

done in a systematic way n prevent financial and legal grief after your
death.

Myths Of Succession Planning:

• Meant only for wealthy

• Should think only after retirement
• Legal Heirs will handle maturely
• Nominee will get the assets
• No need for legal opinion
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1.5 What are the various

ways of doing Succession
Planning
The ways to be used for fam¬ily
succession and inheritance plan¬ning
are customized and de¬pend a lot on
the individual’s finances and station in
life. Some of the commonly used tools
are –

Ways of doing Succession Planning

a) Nomination & Joint Holding

Account
b) Power of Attorney
c) Transfer of Property & Mutation
d) Life Insurance
e) Wills
f) Gifts
g) Hindu Undivided Family (H.U.F)
h) Trusts

Finding which way is appropri¬ate is a

customized task and in¬volves sitting
down with your lawyer and CA (like
with a doctor)and sharing everything
about one’s family and desires and
objectives that one wants to achieve.
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1.6 What are the laws applicable to succession

planning

Religion Applicable law – Dies Testate Applicable law – Dies

(with a Will) Intestate (without a Will)

Hindus Indian Succession Act, 1925 Hindu Succession Act,1956

Buddhists Indian Succession Act, 1925 Hindu Succession Act,1956
Sikh Indian Succession Act, 1925 Hindu Succession Act,1956
Jains Indian Succession Act, 1925 Hindu Succession Act,1956
Christians Indian Succession Act, 1925 Indian Succession Act, 1925
Parsis Indian Succession Act, 1925 Indian Succession Act, 1925
Jews Indian Succession Act, 1925 Indian Succession Act, 1925
Muslims Shariah Law Shariah Law
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Key Learning Points
1) Core objective of succession planning is to enable
distribute wealth in a pre-determined manner to a certain
beneficiary or beneficiaries to whomever the owner of
the assets wishes.
2) Succession planning is needed because dying
intestate can lead to severe hardship for the family both
financially and emotionally.
3) If succession planning is not done at all or done
ambiguously then family members end up fighting each
other in court thus delaying the possession of assets to
its rightful beneficiary.
4) While creating your financial plan or even succession
plan, it is important that you involve your spouse and
children and include their opinionsand make them a part
of the entire exercise.
5) If your family is aware of your succession plan and
how to access your assets, then half of
the battle is almost won in the case of
your death.
6) Common man in India is afflicted
by several myths when it comes to
succession planning.
7) You can do succession planning in
various ways,viz, nomination, buying
life insurance , by gifting , by drafting a
will or by creating a trust among other
ways.
8) India being a diverse country,
different laws govern succession
planning in situations like dying without
leaving a will or dying with a valid will.
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Multiple Choice Questions

1. What is Succession Planning?

a) It is concerned with passing of your assets to your trouble making
relatives
b) It is concerned with how soon you can get your parents assets
c) It is concerned with passing of your assets to your family
d) None of the above

2. Why succession planning is needed?

a) The social and family structure in India is increasingly becoming
nuclear
b) Need to prevent wealth being passed on to wrong person
c) Dying intestate leads to bickering and fighting among family
members in courts
d) All of the above

3. What is the need to involve your family?

a) If your family is aware about your assets and the process as to how
to access, then they will not be confused rather get peace of mind.
b) If your family in not aware about your assets and the process as to
how to access them the situation is very enjoyable.

?
c) If your family is aware about your assets and the process as to how
to access, then they will not suffer financially and time spent as well as
costs incurred may be less.
d) Both (a) and (c)
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4. Which of the following statements is FALSE?

a) Succession planning is meant only for wealthy
b) Succession planning should be done as soon as you start earning
and are having some dependents in your family
c) Nominee is only a trustee of your assets
d) None of the above

5. Which of the following statements is TRUE?

a) if you don’t have legal knowledge to make a succession plan then it
is good idea to leave everything in the hands of God
b) If you don’t have legal knowledge to make a succession plan then
it is good idea to hire the services of experts like lawyer , chartered
accountant and financial advisor/planner
c) If you don’t have legal knowledge to make a succession plan then
do nothing
d) All of the above

6. Which of the following is true in case of dying intestate?

a) Nominee will always get the assets irrespective of the situation
b) Nominee is just a trustee of the assets
c) If you die intestate, then transmission of assets is as per the country’s
succession laws
applicable to specific religion
d) Nominee as mentioned in the Will is entitled to assets

7. Which of the following represents correct way of doing succession

planning?

a) No nomination in investment accounts

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b) Gift & Wills

c) Giving cash to your family
d) None of the above

8. If a person dies without making a valid will, he is said to have died

___________

a) Joyfully
b) Intestate
c) Testate
d) All of the above

9. Buddhists and Jains are covered by which law or act for the purpose
of succession planning if they die intestate?

a) Hindu Succession Act,1912
b) Indian Succession Act,1925
c) Hindu Succession Act,1956
d) Shariah Law

10. Hindus are covered by which law or act for the purpose of succession
planning if they die after making a Will?

?
a) Hindu Succession Act,1912
b) Indian Succession Act,1925
c) Hindu Succession Act,1956
d) Shariah Law
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Ways of doing

2
Succession
Planning
In this chapter we will be
discussing about different ways
of doing succession planning in
details.
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2.1 Nomination
a) A nominee is the trustee of your assets, to whom the
bank or any financial institution (mutual fund, insurance
company and so on) will transfer your funds in case of your
death.

b) Often, individuals think that nominees are their legal

heir. But actually that is not true.

c) The owner of your assets will be your legal heir as per

your Will, or if you have died intestate (i.e. in the absence of a
Will) the transmission would be as per the India’s succession
laws.

• Nominee is only a trustee

• Nominee may not be always the

legal heir

• Legal heir as per the Will

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2.1.1 Beneficiary in case of different assets

Financial assets
a) For most financial assets (such as mutual fund investments,
bank accounts and so on), a nominee is not compulsorily or
necessarily the beneficiary, but only a trustee responsible for
distributing the assets to your legal heirs as per the Will or
succession laws.

b) For some financial assets such shares, the nominee can be

the owner of the assets after your death and not the legal heirs.

The Honourable Bombay High Court in its judgement in the 2010

Harsha Nitin Kokate case ruled that the nominee and not the legal
heirs would inherit the shares.

c) In 2015, in Salgaonkar-Ghatalia judgement the

abovementioned was overruled by Justice Gautam Patel of the
Bombay High Court and upheld the view that rights of the heirs
supersede that of the nominee.

d) For E.P.F.(Employees Provident Fund) it is the nominee and

not the person stated in the will, who inherits the amount.

In fact, according to the rules, you cannot nominate any person

other than a family member to your EPF account, unless you do
not have a family at all.

e) To address this kind of ambiguity and to avoid the court

battle, a way out is to appoint the intended beneficiaries only as
nominee.
It is also advisable to write a clear Will, which shall automatically
supersede everything else.
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Insurance
a) There are different categories of nominees in case if insurance.

b) A category called ‘beneficial nominee’ wherein if you nominate

someone as your beneficial nominee, such nominee, does not have to
share insurance money with other legal heir.

A policyholder can appoint multiple ‘beneficial nominee’ mentioning

their share.

c) Another category ‘collector nominee’ is also there wherein the

person mentioned will simply receive money from insurance company
and facilitate the transmission to legal heir which may happen based on
succession laws.

d) A nominee has a right to claim money even at maturity in case

insured person survived the term of insurance but dies before claiming
the maturity benefits.
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Property
a) The nominee may not be the ultimate beneficiary of the assets but
may be required to pass them to the legal heirs.

In cases where the nominee is not willing to pass the asset(s) to the legal
heirs, can be taken to the court.
The legal heirs then would need to backup their claims by producing a
succession certificate or a probated/registered Will.

b) So, in order to transmit your assets to your loved ones smoothly, you
should nominate your intended beneficiaries only as nominees to avoid
confusion and also make a Will and state the name of your beneficiaries
for every asset in a clear manner in your Will.

In the absence of this, someone else can make claim on your assets and
your family might have to go through time consuming, exhaustive and
costly legal procedures to get possession of assets which are rightfully
theirs and may result in a lot of fighting at the time of distribution of
assets.
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Simply nominating a person at the time of creation of an asset does

not necessarily make that person the beneficial owner of the asset
after your death.

Financial Assets Insurance Property

• Nominee may or • Beneficial Nominee • Nominee may

may not be the legal • Collector Nominee or may not be the
heir • Multiple nominees legal heir
• Better to write a possible • Good to
clear will mention in the
Will who is the
beneficiary
• Clear will a
must to avoid legal
battle

Every asset is governed by different laws which might change over time.
Therefore, succession planning needs to be undertaken carefully to ensure
the easy transmission of your wealth.
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2.1.2 Nomination vs. Assignment
a) In case of a life insurance policy making nominees is restricted to
immediate family members such as spouse, parents and children as the
ultimate beneficiary so that the insurance money can go to the intended
recipient.

b) Nomination is a right given to the policyholder to appoint person(s)

to receive the money in case of a demise of the holder.

One can appoint multiple individuals as nominees and can also specify
their shares of the policy proceeds in percentage terms.

c) In case of an assignment of a life insurance policy, the nomination

automatically stands cancelled.

d) An assignment of the policy automatically transfers the right of the

policyholder (assignor) and his/her nominee to receive the sum assured
on death of the policyholder or on maturity of the policy to the assignee.
e) Assignment must be in writing and a notice to that effect must be
given to the insurer. But the catch is that once the assignment has been
done, it cannot be revoked.

After assignment, the assignee will be eligible to receive the proceeds

from the policy, and not you, even if you survive the tenure, (unlike
nomination).

f) The assignment of life insurance policies can also be used as collateral

while taking a loan. If an insurance policy is assigned to the lending bank
and the policy holder expires during the tenure, the insurance company
shall pay the outstanding loan amount to the bank and the remainder (if
any) will be paid to the legal heirs of the policy holder.

In this case, if the holder survives the tenure, the bank will reassign the
policy back to him/her
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BASIS FOR NOMINATION ASSIGNMENT

COMPARISON
Meaning Nomination means appointment Assignment means giving of
of a person, by the policy holder right, title and interest of the
to receive the policy benefits, on policy to another person (By
the event of death. assignor to assignee )
Purpose To help beneficiary recover the To transfer all rights and interest
policy amount when it becomes in favour of the assignee.
due for payment.
Attestation is not required in Attestation is required in
Attestation
nomination. assignment.
Consideration It does not involve consideration. It may involve consideration.
Right to sue Nominee has no right to sue Assignee has the right to sue
under the policy under policy. (Nomination
stands cancelled on assignment)
Revocation Can be changed or revoked Can be revoked one or two
several times. times during the term of policy.
Favour Usually made in favour of Can be made in favour of
immediate relatives. immediate relatives or to
external party like a lender.
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2.2 Joint Holding Account

a) When you open a bank account or any other
investment account then you are given a choice to hold
it in either ‘Single’ mode or ‘either or Survivor mode’ –
this is the joint mode of holding the investments or bank
account.

b) It is better to hold joint accounts with your spouse.

Such joint accounts hold signatures of either holder valid
to carry out a transaction.

Having a joint account with your spouse and nominating

your child is a good way to ensure easy transfer of your
financial assests as the surviving members get seamless
access.

c) If both account holders die, the nomination helps

the child to get immediate possession of funds.

2.3 Power of Attorney (PoA)

• It is a legal authority given by one person (donor)
to another (donee) to act on his behalf.
• A PoA can be general, which enables the donee
to carry out all deals on behalf of the donor, while a
specific PoA is given for a particular purpose.
• A PoA can be revocable or irrevocable.
• A PoA can be misused if given to an unsuitable
person. Moreover, it is not a substitute for a will as it
ceases to be valid immediately on the donor’s demise.
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Power of Attorney Donor Donee

• General • Revocable PoA • Can misuse PoA

• Specific • Irrevocable PoA • No substitue for
Will

2.4 Transfer of property & Mutation

• Transfer of property refers to the process of shifting the title of the
property from one person to another.
• Both movable and immovable properties can be transferred.
• Property can be transferred through various means like sale or
under a will..
• Once the transfer is done, the new owners must do mutation
which simply means getting the immovable property registered in his/
her name in the records of the municipal corporation or land revenue
department.

2.5 Life insurance

• Life insurance serves a very good tool for estate planning apart
from providing risk cover.

• This is because of the reason that one has to pay lesser premiums in
total when compared to the sum assured the beneficiaries can receive.

• Generally in the case of insurance the earlier one starts the more
benefits one will get in terms of lesser premiums.

• Term insurance and whole life insurance specially serve as good

estate planning tool for the simple rule that they offer protection for
the whole family apart from building an estate.
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2.6 Will

2.6.1 What is a Will

As per law, a Will is legal declaration of the intention by the one
making it – the testator –with respect to property that he/she desires
to be carried into effect after his death.

Simply put, a Will is a written document in which an individual specifies

how his wealth should be distributed or utilized after his death.

2.6.2 Benefits of writing a Will

1. Provides the testator an understanding of his/her current
financial status and even an opportunity to improve in the remaining
life span.
2. Brings clarity about passing of assets among loved ones
3. Avoids disputes within the family and ensures proper
distribution is done thus preventing financial and legal hassles later
on.
4. Enables provisioning for minor children and children with
special needs as per your wish
5. Possible to Enables to disinherit some relatives who are
troublemakers
6. Helps address transfer of digital assets
7. Helps address transfer of offshore assets
8. Can specify funeral wishes
9. Can specify wish to donate organs
10. Ensures peace of mind and happiness
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2.6.3 Who can make a Will and when

a) Any person who is above the age of 18 is eligible to make a
Will.

He should be of sound mind i.e., capable of understanding his actions

and should be free of any influence at the time of writing the Will.

b) As soon as a person is 18 years old he should write a Will

As we live in uncertain times where people meet untimely death due

to accidents, heart ailments or other lifestyle diseases and even terror
attacks

c) Do not wait to create lots of assets / wealth till you turn old
like 60 – 65 years of age

Because many times people in their old age suffer from physical and
mental illness, sometimes they lose their capability to understand.

If will is created at such an age when a person is not in his proper

senses may create doubts, misunderstanding and disputes in the
family later on.

d) Therefore,there is no specific age when you should make a Will

As long you’re a major. But in the following circumstances you must

consider making a Will right away –

1) Married or in a relationship
2) Started afamily
3) A situation of divorce or re-marriage
4) Terminalillness
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2.6.4. Disadvantages of not writing a Will
a) When you die without writing a Will (called “intestate” in legal
language), your assets aredistributed as per Succession Laws applicable
to you.

India is a diverse country with different Succession laws governing

different religions and also different assets.

b) Such succession laws have fixed proportion to distribute properties

to family members which may not be as per your wishes.

There could be chances of delay in distribution of properties and may

lead to legal cases, disputes amongst family membersand not to forget
financial distress can also happen till the time beneficiaries get possession
of assets.

c) Court would decide who will look after minor children

d) There will be no executor or guardian and appointing another person

potentially has the risk of delays, additional expenses and even a loss

e) There could be bickering and fighting within the family over assets
turning the environment acrimonious. Your children and/ or spouse
would be left fighting legal battles.

Certain assets that you wanted to keep within the family, maybe sold.

f) In case of a common disaster, where your whole immediate family

passes away; your assets may get passed on to relatives whom may
have never spoken to or you were not in good terms with, as against
considering passing them on for charity

g) Transmission of moveable and immoveable may be expensive and

time consuming
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2.6.5 Points to consider while writing a Will

1. A Will can be prepared by anyone who is 18 years of age, of sound
mind, and free from any coercion, fraud and undue influence.

2. Use the title ‘Last Will and Testament Of (state your name here)’
to make it clear that the document is your Will and legal. Herein, state
your full name, current address, and also mention that you are of sound
mental health and under no pressure from any one to make the Will.

3. Name an executor - a person who will secure permission (called

probate) from Court for distribution assets as per Will. A trust worthy
person should be named as an executor and you must get their permission
before nominating them.

This is because if they refuse to become an executor later, then there

might be no one to execute the Will, leaving it to the court of law to
appoint an administrator.

Also, it will be a good idea to inform the executor and family members
about the location of your Will in order to avoid confusion later.

4. A will can be hand written or typedout.Stamp paper is not necessary.

You can write a Will on a plain paper, sign and date it with minimum 2
witnesses and keep it in a secure location.

Also, it is not compulsory for one to register a Will with the Registering
Authority, but it is advisable to get it registered to avoid litigation later
on.

5. While bequeathing assets to any minor children, make sure to

appoint a guardian for the assets until such time the minors reach an
adult age.

6. It is extremely important for a Will to be simple, precise and clear.

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7. It is possible to make changes or minor alterations in a Will if you

want to do so (this is called ‘codicil’). However in case there are too many
or major changes, it will be better to make a new Will alltogether.

8. Always put a date on your Will. If more than one Will is made then
the one having the latest date will supersede all other Wills.

9. Each page of the Will should be serially numbered and signed by

the Testator (that is the person making the will) and the Witnesses.

This is to prevent the Will being substituted, replaced, or pages being

inserted by people intending to commit fraud.

At the end of the Will the Testator should indicate the total number of
pages in the Will. Corrections if any should be countersigned.

10. While writing a Will along with the laws of the country, one’s religion
also plays an important role. For example, in case of Hindus, any assets
that have been acquired by oneself can be bequeathed as per one’
wishes. However any inherited property cannot be transferred according
to your wish, as the laws of inheritance would apply.

11. Although it is possible to draft a Will on your own, it is always better

to take the advice of a trusted lawyer or online will making websites
while writing a Will. This will reduce any chances of misinterpretation or
litigation from relatives
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2.6.6 Who should write online Will
• If you have a simple and small family structure and you are not having any
business but earning a salary and wealth through the same; you may consider
making a Will online if there are no complexities involved.

• Many online Will writing portals are backed by companies providing legal
services that have emerged lately in India, and are cost effective. With the
growth of nuclear families, the concept of an online Will is gaining popularity.

In most case the process too is very simple…

a) Register on the portal
b) Enter your details in the prescribed form
c) Make payment
d) Receive first draft then finalisation happens and Will is delivered via email
or at your address (offered by some companies)

• Also, you have the freedom to revise the online Will (within a given time
frame) if you find it is not drafted as per your requirement or to account for
any change in circumstances.

• Some Will writing portals also offer add-on services like registration of a
Will and appointment of the executor, but it’s not necessary for the customer
to get it done by them only.

2.6.7 Who should go for offline Will writing

In complex cases like the following, it makes sense to take the offline route
to make a Will and hire a lawyer or avail services of legal firm: -
1) You are a citizen of another country
2) There is ancestral wealth
3) Assets are substantial
4) There are several claimants to the estate
5) You have re-married
6) You think there is a chance of the Will being contested
7) You have a business
 33

2.6.8 Who should stand as witness to the Will

a) Choose witnesses carefully as their purpose is to prove in Courts
that the Will is authentic

b) Minimum two witnesses are needed to execute a Will while at least

one is needed to prove the Will in court. There is no bar on maximum no
of witnesses.

c) Try to choose witnesses who are younger to you due to higher

probability of survival. The best practice would be to have a trusted
doctor and/or a lawyer as a witness to sign the Will.

d) Remember, it is not mandatory for a witness to read the contents of

a Will before signing it; because he/she only confirms that the Will has
been signed in his/her presence.

e) A beneficiary cannot be a witness.

 34

2.6.9 Who should be the executor of the Will

a) An executor is a person who takes care of your assets as a custodian
until they get transferred to the intended beneficiaries. So the role of an
executor is very important.

b) It is common practice in India to appoint family members / friends

as executors. But executing a Will is not easy as the executor must have
legal and finance knowledge plus he has to spend lot of time and effort
to get the Will probated and then executes the Will.

c) It is a good idea to appoint someone as your executor who is younger

to the testator. Thereby, the executor has chances to outlive the testator.

d) One should avoid appointing a beneficiary as an executor to avoid

conflict of interest. But in the case of nuclear families, where the number
of members is less, and assets structure is not very complex, then
beneficiaries (individuals) can be appointed as executors.

e) Appointing an individual as executor is a cost effective option,

as people close to the testator generally do not charge a fee for their
services.

f) But before you nominate an individual as your executor always seek

his/her permission.

This is because if they refuse to become an executor later, then there

might be no one to execute the Will, leaving it to the court to appoint an
administrator.

g) If you don’t find a competent person as an executor for your Will,

professionals such as lawyers, chartered accountants and other corporate
entity offering executorship services can be chosen as executor for a fee.
 35
h) If the number of members in family are large or if assets to be
distributed are of large value and complex in nature then it is a better
idea to appoint corporate entity offering executorship services as your
executor.

i) As no individual is perpetual in existence and may also hold a bias,

increasingly, people are considering ‘professional executorship and
trust companies’, which by law, have perpetual successions and are
independent experts in the domain.

2.6.10 Registration of Will

a) Registration of the will is the most important part of the Will making.

b) As stated earlier, it is not mandatory to register a Will but advisable.

Will can be registered with the registrar/sub-registrar of assurances in
your area by paying a nominal registration fee.

c) The testator has to be personally present at the registrar’s office

along with the witnesses for registration.

If the registrar/sub-registrar is satisfied with the documents furnished,

an entry will be made in the register with the year, month and date
mentioned, and you, the testator, will be issued a certified copy.
d) Note that once you Will is registered, it is in the custody of the
registrar. Therefore it cannot be tampered, mutilated, stolen or destroyed.
You are given only the certified copy.

In case you need to make changes in your registered Will, it would be

better to re-register the amended Will, although it is not compulsory.

The new amended will be considered to be a valid one and old Will
previously made and registered will be considered invalid.

Therefore, whenever you make amendments in the existing old will or

 36
make a new will , do not forget to register it.

e) Registration can serve as an evidence of genuineness of the Will in

the court in case of legal dispute after the death of the testator.

2.7 Gifts

2.7.1 What is a Gift

a) As per Transfer of Property Act,
1882, a gift is considered to be valid
only when it is made voluntarily;
it is without consideration; there
has been an offer by the donor;
and the offer has been accepted by
the donee, and the donee actually
accepts the gift.

b) A gift deed must be executed by

the donor and the donee. Further,
the gift deed must be attested by
two attesting witnesses. Stamp duty
must be paid on the gift deed and
the same must be registered.

c) A gift deed is a compulsorily

registerable document under the
Registration Act, 1908 and will
have to be registered with the
sub-registrar of assurances. The
applicable registration charges will
also have to be paid.
 37

2.7.2 Who can Gift and what can be gifted

a) Generally immovable property is gifted by a legal registered
document known as the gift deed which should be legally attested.

b) Movable property can be gifted just as immovable property or

by delivery. Sometimes gifts can be made even by book entries.

c) A person gifting any property should have a valid ownership of

the property.
Gift Donor Donee

•Registration of • Transfer • Receipt is

Gift Deed Assets OR Prop- tax free
erty

Comparison between Gift and Will

a) The difference between a will and a gift is that a gift has to be
executed during the life time of the donor unlike in the case of a will.

b) Cost of writing a will depends on the complexity of assets and

the structure of the succession plan laid out in the will and also on the
preparer whereas cost of writing a gift deed is very minimum but one
has to pay stamp duty for registration of immovable property.

The stamp duty varies from state to state but in most cases is significantly
lower than the normal stamp duty and is payable usually at the circle
rate or ready reckoner rates as published.
 38
c) A will is relatively easy to write and it can be revoked with a new
will or amended through a codicil as many times as one wants till the
testator is alive but a gift deed is irrevocable once executed and thus
does not allow for any changes even if one changes his mind.

d) A will is not required to be registered in court of law (although

advisable) and can be challenged in the courts thus prolonging the process
of transfer of wealth to the beneficiaries but a gift deed for immovable
properties needs to be registered for it.

e) Under a gift deed the transfer of assets happens during the life-
time of the donor and the transfer happens immediately compared with
using a will which is a much longer process.

f) The taxation for gift deeds in being tax-free for both the donor and
donee when in favour of defined relatives is also beneficial.

Will Gift

Triggers after death of Executed during lifetime of donor

testator
Registration not Registration must be done for immovable
compulsory property

Assets transfer only after More suitable for transfer of immovable

court probate which takes property as transfer during lifetime of do-
a long time nor

Can be changed or Cannot be revoked once executed

revoked

Can be challenged in Is virtually impossible to challenge in

Court of law Court of Law
 39

2.8 HUF (Hindu Undivided Family)

The Hindu Undivided Family (HUF) concept is a kind of
“Joint Hindu Family” which enjoys a separate tax status
under the provisions of Section 2(31) of the Income-tax
Act, 1961.

The affairs of the HUF are managed by the eldest member

of the family, who is known as the Karta (manager) of
the HUF.

A typical HUF consists of a Karta, wife, his sons, grandsons,

great- grandsons and daughters. All members are also
known as coparcener.

The daughter(s) on marriage continue to be the

coparceners in her father’s HUF, but are considered to
be members in the husband’s HUF post-marriage.

The male members are by and large called the

coparceners of the HUF.
 40

2.8.1 Rights of Coparceners and members of

HUF

a) Once a property is assigned to a HUF, all coparceners have an equal

right to it. Even the Karta cannot transfer the property unless he gets
consent from all coparceners.

b) All coparceners can at any time, demand partition of an ancestral

property assigned to a HUF by way of distribution of HUF property among
the coparceners.

While each coparcener would be entitled to a share of the property, the

members would be entitled to receive maintenance from the HUF.

c) If a coparcener decides to separate himself from the HUF, the others

being his father or brothers may continue to be coparceners to the extent
of their share.

In case he has a family, then he will become the head of a new joint
family.

If he obtains any property on partition with his father and brothers, that
property will become the ancestral property of his branch.

d) The interest of coparcener in property on death shall transfer by

testamentary will or intestate succession and not by survivorship.

e) The discrimination between son and daughter has been removed

vide amendment to Section 6 of Hindu Succession Act 1956 w.e.f.
September 9, 2005,i.e, unmarried daughters as well as daughters married
are regarded as coparceners

They are also eligible to demand partition of an HUF, and receive equal
share in the HUF property just like the sons.
 41

2.8.2 Properties or Assets that can be classified

as the assets of a HUF

a) Ancestral property or assets inherited from father, grandfather or

great grandfather

b) Any property or assets received on partition of a larger HUF of which

the coparcener was a member in the past

c) Property or assets acquired with the aid of joint family property

d) Separate property or assets of a coparcener, blended with the family

property

e) Any assets or property received as a gift by the HUF from close

relatives or friends
 42

f) Assets bequeathed by a Will that specifically favours the HUF

• It is noteworthy that the term ‘Coparcenary Property or Joint Family

Property’ is wider in connotation than the term ‘ancestral property’. While
an ‘ancestral property’ is the one inherited from father, grandfather or
great grandfather, in which the share is allotted on partition;

• Coparcenary property or joint family property’ is the one acquired

by the coparceners with joint efforts – so for example, father and sons
would be joint family and hold coparcenary property.

• There may be an instance where a single male member in the family

having no ancestral or coparcenary property, receives gift from relatives
or friends of members of family.

If the single male member of such family decides to add this gifted
property into joint family property, then such property would neither be
ancestral nor coparcenary property but certainly be a HUF property.

• While there can be a gift or a Will for the benefit of a HUF, it is

immaterial whether the giver is male or female, whether he or she is a
member of the family or an outsider.

What matters is the gifted property is for the benefit of the whole family.

• The Karta of the HUF can make a gift of an ancestral immoveable

property within a reasonable limit keeping in view the total extant of the
property.

The Karta can even gift his self-acquired property to the branch HUF of
his Son, through a Will, which will then become the ancestral property
of the son’s HUF.
 43

2.8.3 What happens in case of Death of the

Karta
a) The Karta manages the family property, which is regarded as the
joint property of all the coparceners. On the death of the Karta, his HUF
can continue and the next senior-most coparcener of the family shall be
the Karta.

b) If under given circumstances, senior-most coparcener is not in a

position to discharge his obligation, then the next senior coparcener can
be the Karta of HUF with the mutual consent.
Hence with mutual consent, the HUF can also appoint any coparcener as
the manager.

The assessing income tax officer / income tax department should also
be intimated about the death of the Karta and the appointment of the
new Karta.

c) In case of death of a coparcener, his share in the property of a Joint

Hindu family shall devolve by testamentary will or intestate succession,
as the case may be, and not just by survivorship.
A coparcener can bequeath only his share in the HUF property and not
the entire property of the HUF.

d) In case the coparcener does not execute any Will, the property will
devolve as per the rules of intestate succession applicable to Hindus
under the Hindu Succession Act, 1956, as stated below:

1. The daughter is allotted the same share as is allotted to a son;

2. The share of the pre-deceased son or a pre-deceased daughter, as

they would have got had they been alive at the time of partition, shall be
allotted to the surviving child of such pre-deceased son or of such pre-
deceased daughter; and
 44

3. The share of the pre-deceased child of a pre-deceased son or of a

pre-deceased daughter, as such child would have got had he or she been
alive at the time of the partition, shall be allotted to the child of such pre-
deceased child of the pre-deceased son or a pre-deceased daughter, as
the case may be.

These guidelines will help you to take right decisions while transferring
assets and properties of a HUF.
While doing this, don’t forget that the will must be in writing, signed by
the testator in the presence of two or more witnesses, who should also
sign as witnesses on the Will.

Also, note thatany part of the property can’t be bequeathed to the signing
witness.

Partition of HUF
a) Partition of HUF means physical division of property along with the
income arising out of the property. Partition of only one of the above
mentioned (i.e. property and even the income arising out of it will not be
termed as a valid partition under law.

b) Every coparcener has a right to ask for partition, which may be total
or partial.
 45
Types of Partition
a) A partition is total when all prop¬erties of the family are divided
among the members, and on such a partition, the HUF ceases to exist.

b) Partial partition is of two types: partial partition vis-a-vis property,

which means distributing certain property to the members and retaining
balance properties with the family; partial partition vis-a-vis person,
which implies distribut¬ing certain properties to some members of the
family, following which such member won’t remain part of the family
any longer.

c) In partial partition, an HUF continues to be a separate entity. The

only change is some of the prop¬erty/ coparcener don’t continue to be
part of the family.

d) Female members are entitled to a share equal to that of a son in the

event of a partition.
 46

2.8.6 Tax impact on partition of HUF

a) If the capital or income base of the HUF is large, it may be more
viable to make a total partition of the HUF property.

On the partition of the larger HUF each of the married sons will receive
the property for and on the behalf of his own smaller HUF. If the smaller
HUFs are in the lower tax bracket, it will help save tax in view of spreading
income of the larger HUF.

b) Partition of property does not attract capital gains tax.

c) Partial partition is not recog¬nised for tax purposes. Income earned

on the property received by a member on partial partition would be
clubbed with the income of HUF as if there’s no partition

2.9 Trusts

2.9.1 Terms and Terminologies

a) Author of the trust: he is a person who creates a trust. The property
or other assets mentioned in the trust deed belongs to the author of
the trust. Author of the trust is also known as Settlor or Grantor.

b) Trustee: he is a person on whom the author of the trust places the

responsibility of managing the trust and executing the trust deed.

c) Beneficiary of the trust: it refers to an individual who benefits

from the transfer of the property or assets under the trust.

d) The subject matter of the trust is the trust property or trust money.
 47

2.9.2 What is a Trust

• A trust is simply a legal arrangement / vehicle in which the Settlor
transfers ownership of property and other assets to the trust, the named
trustee then manages and controls the assets for the benefit of the
named beneficiary.

Creation of Trust Transfer of Assets Tustee manages assets

Settlor Ownership with Trust Ultimate benefits for

beneficiary

2.9.3 Why a Trust is created

a) Private trusts are created to specifically earmark funds intended
for minor children, elderly parents, disabled dependents and other
beneficiaries.
b) The main advantage of creation of a trust is that the property passes
on directly to the beneficiary absolutely hassle free.
c) Another reason for creating trusts can be to deny beneficiaries
direct access to funds which they may squander away, while ensuring
adequate income flows from it for their maintenance.
d) A trust can be a valuable succession planning tool in many situations,
but many do not know exactly how creating a trust may benefit their
estate.
For the more affluent, who own businesses governed by families, a trust
is a vehicle that provides effective and hassle free wealth management,
asset protection and tax efficiency.
 48
Reasons for forming Trust

• Specific use earmarking

• Assets pass directly to beneficiaries
• Prevents squandering of funds
• Good tool for succession plng

2.9.4 Types of Trusts

a) A trust structure comes with certain inherent advantages. A trust
provides the flexibility to be set up in more than one form or in hybrid
forms as per the requirement.
b) A trust can be either private or public. A private trust is a trust
generally for the convenience and support of individuals of families.
c) Trust can also be structured as revocable or irrevocable.
d) A revocable trust can enable the settlor to exercise control over the
property but can be prone to clubbing provisions under the tax laws.
e) An irrevocable trust can provide safeguard against future creditor
claims on the assets in case of, bankruptcy, since the settlor ceases to
have the title to the trust property, yet at the same time enable indirect
control over the property through terms of the trust deed. This is one of
the main benefits of a trust structure which allows for preservation of
your wealth.

Trust Type as per Structure Trusts Type as per Assets

Accessability

Private Revocable

Public Irrevocable
 49

2.9.5 How a trust can be created

a) A living trust is a trust that is created while the settlor is still living,
and in that case, they may also be the trustee as well as the beneficiary
until a triggering event, such as their incapacitation or death, after
which named successors take over.

This allows a living trust to also act as a mechanism for managing

finances in the event you can no longer manage them on your own.

b) A trust can be also formed according to instructions in a will. This

is known as a testamentary trust.

c) Assets that can be transferred and owned by a trust include real

estate, stocks, bonds, valuable personal property and businesses.

A trust, in relation to an immovable property, must be in writing and

registered.
 50

Key Learning Points

1. A nominee is only the trustee of your assets. Legal heir for the assets
will be as per your Will. Every asset is governed by different laws which
might change over time.

2. In case of life insurance, nomination and or assignment should be

done carefully due to the impact.

3. Joint Holding Account, Power of Attorney and transfer of property

can also function as ways of succession planning.

4. If used properly, term insurance and whole life insurance can serve
as good estate planning tools.

5. The person who makes the will is called the testator, executor is the
person who executes the will after getting the permission from court,
and this is called probate. A will can also be modified using codicil.

6. Biggest benefit of making a Will is

that it ensures intended distribution
of assets and consequently peace
of mind and happiness for both the
testator and the beneficiaries.

7. Anyone who is above 18 years

of age and of sound mind can make a
will.

8. If you die without writing a Will

(called “intestate” in legal language),
your assets aredistributed as per
Succession Laws applicable to you.
India is a diverse country with
different Succession laws governing
 51

different religions and also different assets. There could be bickering

and fighting within the family over assets turning the environment
acrimonious. The whole process could be time consuming and
expensive.

9. A will can be hand written or typed out and must be dated along with
signature of 2 witnesses and the testator. Registration is not compulsory
but advisable to avoid disputes in future.

10. Although it is possible to draft a Will on your own, it is always better

to take the advice of a trusted lawyer or online will making websites
while writing a Will. This will reduce any chances of misinterpretation or
litigation from relatives.

11. If you have a simple and small family structure and you are not having
any business but earning a salary and wealth through the same; you may
consider making a Will online if there are no complexities involved.

12. In complex cases, it makes sense to

take the offline route to make a Will
and hire a lawyer or avail services of
legal firm.

13. A gift deed has to be executed

during the life time of the donor unlike
in the case of a will.

14. The affairs of the HUF are

managed by the eldest member
of the family, who is known as the
Karta of the HUF. Rest of his family
members are called coparceners or
simply members.
 52

15. Once a property is assigned to a HUF, all coparceners have an equal

right to it. Even the Karta cannot transfer the property unless he gets
consent from all coparceners.

16. In case of death of a coparcener, his share in the property of a Joint

Hindu family shall devolve by testamentary will or intestate succession,
as the case may be, and not just by survivorship.

17. An HUF can also be partitioned for dissolution and then it cease to
exist. Partition can be complete or partial.

18. Trusts are created to specifically earmark funds intended for minor
children, elderly parents, disabled dependents and other beneficiaries.

19. The main advantage of creation of a trust is that the property passes
on directly to the beneficiary absolutely hassle free.

20. The person who creates the trust is called author or settler and the
person who manages the trust for the benefit of beneficiaries is known
as trustee.

21. Trusts can be created as public or

private. Also they can be structured
as revocable or irrevocable
 53
Multiple Choice Questions

1) Statement -1- Nominee is the legal heir of your assets in all the
cases. There is no need to make a Will for any of the assets you own.

?
Statement-2 - Nominee is only a trustee of your assets. Legal heir will
be as per the will but every asset in India has its own laws and in certain
cases they override will.
Which statement is TRUE?

a) Only statement-1
b) Both statements are false
c) Only Statement-2
d) Both statements are true

2. Assignment means Assignment means giving of right, title and

interest of the policy to another person (By assignor to assignee). Can
assignment be revoked?
a) No
b) Assignment cannot be done in firstplace
c) Yes
d) Maybe , but not sure

3. Which mode of holding in a bank account or any investment product

ensures easy transfer of your financial assets to the surviving members?

a) Single mode
b) Partial mode
c) Joint mode
d) All of the above

4. A legal authority given by one person (donor) to another (donee) to

act on his behalf is known as ___________

a) Nomination
b) Power of Attorney
 54
c) Assignment
d) None of the above

?
5. Once a property is transferred, the new owner must do _________
which simply means getting the immovable property registered in his/
her name in the records of the municipal corporation

a) Registration
b) Attestation
c) Mutation
d) All of the above

6. _____________ and whole life insurance specially serve as good

estate planning tool for the simple rule that they offer protection for
the whole family apart from building an estate.

a) Fire Insurance
b) Term Insurance
c) Health Insurance
d) All of the above

?
7. A __________ is a written document in which an individual specifies
how his wealth should be distributed or utilised after his death.

a) Gift
b) Nomination
c) Will
d) None of the above

8. Which of the following is NOT a benefit of a Will?

a) Enables to disinherit some relatives who are troublemakers

b) Avoids disputes within the family and ensures proper distribution is
done
c) Leads to financial and legal hassles later
d) Ensures peace of mind and happiness
 55

9. What is true about making a Will?

a) Any person of unsound mind can make a Will
b) You should wait to create huge amount of assets before you make a
Will
c) There is no specific age when you should make a Will as long you’re
a major
d) Both (a) and (b)

10 A ____________________ cannot be a witness to a Will

?

a) Testator
b) Beneficiary
c) Executor
d) All of the above

? ?
56

Practical

3
Matters – Investors
In this chapter we will be discussing about
advantages of registering documents, Mandatory
Registration, Registration Cost, Optional registration,
Pitfalls of forming HUFs, Comparison between Will
and Trust and Comparison between Will and Trust.
3.1 Advantages of registering documents 57

Paperwork relating to succession planning is cumbersome. But if you want

to avoid trouble in future then it pays to know the nitty-gritty regarding
drafting, attestation and registration of documents.
A small error like a typographical error or wrong spelling of name or a
delay in registering a document can lead to a long legal conflict.

Even improper or incomplete attestation may lead to a major court

battle as the court refuses to accept the validity of documents due to
the mistakes stated above.

Advantages of Registering the documents

• Enables to find out any existing liability or ongoing litigation

• Ensures transparency and secure deals
• Helps prevent forgeries
• Proof that document was actually drawn

3.1.1 Attesting a will

When a will is signed by two independent witnesses, it is said to be
attested.

It is not necessary for the witnesses to sign in each other’s presence

but they must see you sign your will or at least acknowledge that you
were mentally fit to execute the will.

Also, the witnesses or their spouse should not be the beneficiaries of

the will. If you do so, the will is valid.

The witness cannot inherit the property.

Though a relative who is not inheriting your wealth can attest the will,
it is better to appoint an independent, third person as a witness, like a
chartered accountant and a doctor.
58

3.1.2 Mandatory Registration

In the past, various courts across the country have held transfers of
property to be invalid on the premise that document effecting such a
transfer was not registered.
sIt is clearly stated in Section 17 of the Indian Registration Act that the
instruments purporting to transfer or assign any interest in immovable
property should be registered.

That means documents like sales deed or gift deeds, which relate to
immovable property, must be mandatorily registered, failing which the
transfer would be invalid and not recognised by law.

Transfer of immovable property through a general power of attorney

would also be invalid.

The Supreme Court judgement clearly established the rule that a transfer
would be valid only through a registered deed of conveyance.

Source: https://indiankanoon.org/doc/1565619/

Also, if transfer of property is involved in a Will then it must be registered

as required by the Indian Registration Act to be considered a valid will.

(Source: Supreme Court case https://indiankanoon.org/

doc/141466740/ )

Registration also means that records are available to you to find out about
the person who has the title and right to the property, and whether there
is an existing liability or ongoing litigation, before you decide to buy it.

Since the documents are in the public domain, it helps prevent forgeries
and fraud in transactions, especially the evasion of income taxor stamp
duty.
 59

3.1.3 Registration Cost

Cost of registering a document is not very high.
Although it differs from state to state, on an average,
it would cost Rs 1,000-2,000 to register a document,
excluding the stamp duty charges, if applicable.

3.1.4 Optional registration

As per the Indian Registration Actall types of
documents are not required to be registered.
Mandatory and Optional registration has been
clearly distinguished.

According to Section 18 of the Act, the documents

that relate to the transfer of movable property, as
well as wills, are not required to be registered.

A power of attorney with respect to movable

property need not be registered.

Even here the law experts advise that it is better to

register the documents as it lends more sanctity to
the document.

Movable Assets Sale deed/Gift/ Optional

/ Property PoA/ Will Registration

•Immovable • Sale deed/ •Complusory

Assets / Gift/PoA/Will Registration
Property
60
3.2 Pitfalls of forming HUFs
Creating and registering an HUF is fairly easy but complications arises
later on. You should first understand the following disadvantages of
forming a HUF before you decide to form one.
Assets transfer difficult
Once a property is assigned to an HUF, all coparceners have equal right
to it (also includes an unborn child in the womb of a mother).

Now the assets belong to the family and not to any specific individual.

Moreover, assets cannot be transferred or sold without the consent of

all coparceners, and even the Karta cannot transfer it to anyone without
everyone’s consent.

If there is a legal dispute around the property, then selling it can become
extremely difficult.

If there are few members in HUF, then things run smoothly.

But problems appear mostly when the number of coparceners increases.

Since all lineal descendants are part of an HUF, every child, whether boy
or girl, who gets added to the family, becomes a part of the HUF.

One cannot stop the ownership, it is assigned by birth.

Earlier joint families were the norm in India, but now nuclear families
are the norm and with it divorce cases are also increasing.

Divorce can add to complications as once someone becomes a coparcener

in an HUF, the person cannot be moved out.
 61
• Difficult to dissolve
An HUF can be dissolved only if all the members agree for complete
partition. It is only on complete partition that the assets or property can
be shared by the coparceners.

Partition of real estate belonging to an HUF can be a nightmare and leads

to disputes and court cases very often.

A partial dissolution (partial partition) can be done but is not recognised by

income tax law.

• Perceived Money laundering tool

The goal for which the HUF is created has to be clear. If the purpose is only
tax saving, it will work only for the initial years.

As income and number of members grow, complications, too, increase.

If the income tax authorities feel that the HUF has been created to launder
money, it may choose to take suitable action against it.

• Taxation of Assets
Taxation of assets may be an issue as personal funds are put into an HUF,
they will actually be clubbed with the coparcener’s individual income.
This move might not work if the original purpose of starting the HUF was
tax-saving.

• Domicile change by family members

HUFs are essentially an Indian phenomenon. Some family members move
abroad either to study or work and the computation of income can be
difficult as many countries do not recognize HUF.
The computation of income in such cases is still a grey area.
62

• Complex laws and poor understanding

The root-cause of most problems is poor understanding of the laws
that govern HUFs.

These laws are not codified and are read along with the Hindu Succession
Act and the Income-tax Act.

Younger generation, mostly, do not understand these laws, especially

because laws around HUFs are complicated.

Then they either do not agree with their Indian members or get into
disputes with them.

Problems with HUF

• Difficult to dissolve
• Perceived money laundering tool
• Taxation of Assets
• Domicile change by family members
• Complex laws
• Asset Transfer difficult
 63

3.3 Comparison between Will and Trust

WILL TRUST

1 Ease of making Will is easy to draft in Trust deed are difficult

most cases unless assets to write
are complex

2 Coverage Applies to all the assets Applies to the assets

universe of the deceased held by the trust only

3 Accessibility to Anytime you can change You cannot take out

assets the will or make a new assets once put in a
one irrevocable trust

4 Trigger for being For a will to be operational For a trust to be

effective there is mandatory operational there is no
probate which may cost probate
time and money

5 Privacy A will is declared in a A trust is a completely

court of law ,making it private document
public
Can be executed during
6 Timing of Executed only after the the lifetime of the
execution death of the testator settler and continues
after his death

7 Status in court Can be challenged in Cannot be challenged

of law court of law in court of law
64 64

8 Protection from Bequests are Protects businessman/

third party subject to third- HNIs assets from
party claims and creditors
attachments. No
protection to
businessman/
HNIs assets from
creditors

9 Control over No control over the Enables milestone

wealth wealth after being driven distribution of
distributed wealth

10 Costs involved Costs minimum Forming a trust costs Rs.

Rs.5000 (online 2 – 3 lakhs or more plus
will) OR offline stamp duty depending
Rs.10,000 – 1 lakh upon wealth and
for customised or complexities
complex cases
 65

3.4 Comparison between Will and Gift

WILL GIFT

1 Type of A will has to be A Gift deed has to be

document drafted made

2 Required Requires sign of Requires sign of donor

signature testator and attested and attested by two
by two witnesses witnesses

3 Used for Will can be used for Gift deed can be used
all asset classes for all asset classes

4 Timing for Transfer of assets Transfer of assets

transfer of assets happen only after happen immediately in
the death of testator lifetime of donor
and the process
thereafter is long

5 Changeability Will can be modified Gift deed once executed

or changed until the cannot be revoked
testator is alive

6 Registration Registration is Registration is

optional except mandatory where
where immovable immovable property is
property is gifted to donee
transferred
Stamp duty for
7 Registration Stamp duty payable registration may have
charge only when the will is to be incurred but it
registered is lower than normal
stamp duty
66

8 Taxation Immovable property Gift is tax free in the

transfer is tax free in hands of both donor
the hands of the heirs. and the recipient
Capital Gains tax is (donee) if made
levied when he sells to relatives as per
such property certain terms and
conditions laid down
in sec 56 of Indian
Income Tax Act

3.5 What your family should know before your

death
You should make a comprehensive list containing the details and location of
all important documents and other possessions. One such elaborate list is
given below: -

1. Bank Locker Key and related information

2. Various Bank / email accounts and passwords
3. Credit and debit cards information
4. Investment details such as bank fixed deposits, bonds, mutual funds,
demat account, EPF and PPF accounts related information
5. Current liabilities such as credit card bills , outstanding loan details
6. Health care benefits
7. Life insurance policy
8. Car insurance policy
9. Property and fire insurance policy
10. Will
11. Property ownership information
12. Car title
13. Home/Property deed of sale
14. Income tax returns (including any refund information)
15. Identification documents such as Birth certificate, Passport, Driving
License, Marriage certificate, PAN Card
16. People to contact in case of emergency such as insurance agent, doctor,
lawyer, CA and financial planner / wealth manager, property agent
 67

You can easily make such emergency list in MS Excel or

Google spreadsheet. Don’t forget to update the above list
regularly. How frequently should you do so, depends on you,
but at least on annual basis should be done.

Also, inform and keep this list with at least one family
member/ trusted CA or lawyer so that your heirs can access
them easily without hassles and running around.

Make Emergency list+Organize & Update+Handing to trusted

person=Easy access and peace of mind for heirs
68

3.6 List websites useful for succession

planning

1. www.willeffect.in
2. www.dilsewill.com
3. www.willjini.com (HDFC Securities)
4. www.willstar.in
5. www.ezeewill.com (Promoted by NSDL &Warmond
Trustees and Executors Pvt Ltd)
6. www.terentia.co.in (Terentia Consultants Pvt Ltd)
7. www.sbicaptrustee.com
8. www.legaljini.com
9. www.nextgentransfer.com(NextGenEstate Planners)
10. www.universaltrustees.co.in
 69
Key Learning Points
1. Registration of documents has many advantages like

a) Proof that document was actually drawn

b) Helps prevent forgeries
c) Ensures transparency and secure deals
d) Enables to find out any existing liability or ongoing litigation

2. A will, to be valid must be signed by two witnesses.

3. If immovable property is involved in a will, then the will has to be

registered to be considered a valid document.

4. As per the Indian Registration Actall types of documents are not

required to be registered. Mandatory and Optional registration has been
clearly distinguished.

5. Disadvantages of forming an HUF

a) Asset Transfer difficult

b) Difficult to dissolve
c) Perceived money laundering tool
d) Taxation of Assets
e) Domicile change by family
members
f) Complex laws

6. For the purpose of doing your

succession planning by yourself -

a) Choose a suitable vehicle among

Gift, Will or Trust
b) You should be having very good
70

knowledge about the processes and law involved Else you should
hire the services of an expert.

7. You should make a detailed list of all your important investments

and related information (including email IDs and passwords) and
inform about its location to all the family members.

Keep this list with any trustworthy person in family or your CA

so that it can be accessed easily by your heirs when situation
warrants.
 71
Multiple Choice Questions
1. Which of the following are advantages of registering your
documents?

a) Proof that document was actually drawn

b) Registration cost has to be incurred
c) Helps prevent forgeries
d) Both (a) and(c)

?
2. Small errors like wrong spelling of name or a typographical error
can lead to documents like WILL being declared _________ in the court
of law.

a) Valid
b) Intestate
c) Testator
d) Invalid

?
3. How many witnesses should sign on a will to be considered valid?

a) Three
b) Two
c) Five
d) One

4. Which of the following statements is FALSE?

I. Witness to a will can also be the beneficiary of the will. He can also
inherit the property

II. Witness to a will cannot be the beneficiary of the will. He also cannot
inherit the property

a. Only choice no. I

72
b. Only choice no. II
c. Both of the above statements are false
d. None of the above statements are false

?
5. Section 17 of the Indian Registration Act that the instruments
purporting to transfer or assign any interest in immovable property
should be __________ to be considered valid in the eyes of law.

a) Attested
b) Registered
c) Power of Attorney
d) All of the above

6. Statement-1

According to Section 18 of the Indian Registration Act, the documents

that relate to the transfer of movable property, as well as wills, are not
required to be registered.

Statement-2

As per the Indian Registration Act all types of documents are not required
to be registered.

?
Which of the above statements is TRUE?

a) Only statement-1
b) Both statements
c) Only statement-2
d) Both statements are false

7. How can you dissolve an HUF?

a) Joint partition
b) Complete partition
c) Living partition
 73
d) An HUF cannot be dissolved

8. A probate is needed in which structure to make it operational?

a) Will
b) Trust
c) Nomination

?
d) All of the above

9. Which of the following structures cannot be activated during the

lifetime of testator?

a) Wills
b) Gifts
c) Trusts
d) Power of Attorney

10. Which of the following structures cannot be revoked once the

document is executed?

?

a) Will
b) Gift
c) Nominee
d) None of the above
74

Answer Key

Question Chapter 1 Chapter 2 Chapter 3

1 C C D
2 D C D
3 D C B
4 A B A
5 B C B
6 C B B
7 B C B
8 B C A
9 C C A
10 B B B